HARP Refinance Denial After HAMP Modification

by Doug from Meriden, CT and by Vicki T. from Atlanta, GA

Ask Kate about absurd HARP refinance denial following HAMP modification: When a mortgage lender adds rules to Fannie Mae guidelines, the practice is called an overlay. After reading Doug's letter, I call it absurd. Meet Doug who was told he can never refinance under HARP because of a mortgage payment that was 30 days late several years ago following his HAMP modification.

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You'll also meet Vicki, who after heart-breaking changes to her life, is not sure if she should pursue HARP refinancing. I outline the options for distressed homeowners in my response.

HARP Denied Because Late Mortgage Payment Followed Modification

By Doug from Meriden, CT

Kate,

I had a mortgage modification in 2010. Then I was late once in the next 12 months (30 days late, 6 months later).

Today, I meet all qualifications to refinance my mortgage with the HARP program except for this. The lender tells me if there is one late in the 12 months following a modification, no matter how long ago, I can't refinance with Harp.

I'm aware of lenders being picky over credit these days. But insisting you could NEVER refinance because you were late on your mortgage one time in the distant past after modifying your loan terms makes no sense.

HARP Mortgage Refinance Guidelines

In fact, HARP guidelines state that there is no specific period that borrowers must wait after a bankruptcy or foreclosure in order to refinance with the Making Home Affordable Program.

Additionally, one late mortgage payment during the previous 12 months is allowed during the immediate six months before applying for HARP.

How to Become a Savvy Mortgage Shopper

I suggest you begin shopping other financial institutions to compare reactions to your payment history. Unlike a HAMP modification that must go through a borrower's current servicer, you have the right to shop and compare lenders, interest rates, and loan terms for your HARP refinance.

What's the Best Way to Proceed with Loan Modification?

I have a significant change of condition - divorced and physician husband has accepted a 25-year plea deal. I will not be receiving any child support and he was the primary breadwinner.

I am an attorney who works on a contingency fee, primarily. I only made 24k last year, but my income varies and I have made more this year (not significantly more). I have started taking cases on an hourly basis, as well, but am building my practice in that area.

I have a $2400 per month mortgage with Wells Fargo. I am 3 months in arrears as of this month. I now have the money to catch up the arrears. Should I do so or just pay 1-2 months? I want to use the best strategy to be eligible for a favorable loan modification.

Also, do I call my lender to seek help or should I shop around on my own first? What is basic eligibility for Harp? I don't think I have a Fannie Mae loan, but am not sure.

Thank you!

***zz-portrait-left.shtml*** Ask Kate answers: What's the Best Way to Proceed with Loan Modification?

Hi Vicki,

This must be very trying while adjusting to the changes in your life. I feel overwhelmed just reading the circumstances.

Let me see if I shed some light on the mortgage issue.

If you are currently three months in arrears on your mortgage, I doubt that shopping for a HARP refinance will yield much success. I'm not trying to discourage you from trying. But you should consider the HAMP loan modification program (which can only be done through your lender) as a contingency plan to HARP.

Loan modifications are an entirely different animal compared to refinances. So regarding whether or not to make back payments, I recommend that you ask Wells Fargo for instructions when you call about HAMP. I also recommend that the call is initiated sooner than later since three consecutive months of unpaid mortgage payments is a trigger to foreclosure proceedings.

There is also assistance in place to aid distressed homeowners that falls under the HAFA program. But so I don't confuse you with the seemingly endless list of Making Home Affordable acronyms, let's back-up and run through each of the programs I've mentioned.

HARP (Home Affordable Refinance Program)

HARP (Home Affordable Refinance Program) is a total refinance of an existing mortgage on a home with little to no equity, with the goal of providing lower interest rates. Because it is a new loan, it generally must meet investor guidelines to be sold on the secondary market (think Wall Street). This makes the qualifications stricter than HAMP.

HAMP (Home Affordable Modification Program)

On the other hand, there is a program for distressed borrowers called HAMP which modifies the current terms of the existing mortgage. The guidelines are geared toward helping homeowners get affordable mortgage payments. A big plus, there is no cost to obtaining a HAMP modification, in most cases.

HAFA (Home Affordable Foreclosure Alternatives)

Several programs fall under HAFA, with the common goal of providing foreclosure alternatives to distressed homeowners. This one, Hardest Hit Funds - Principal Reduction Program, may be of interest to you since it provides assistance to both the unemployed and underemployed.

Fannie Mae HARP 2 Loan Lookup

By the way, if you aren't sure which loan entity owns your mortgage, go to Fannie Mae HARP 2 Loan Lookup to find out. But know this, HAMP is not restricted to borrowers with Fannie Mae or Freddie Mac loans although it is subject to lender participation.

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